Indie brand acquisitions are becoming an integral part of the strategies of beauty conglomerate strategies, as evidenced by Estée Lauder’s recent purchase of Too Faced for $1.4 billion and L’Oréal’s purchase of IT Cosmetics for $1.2 billion. Beauty now boasts 11% of wallet share among teens, which means there should be an intense competition in capturing those young – and hopefully loyal consumers.
This new group of younger companies approach commerce completely different than their predecessors. Almost entirely bypassing department store relationships, these brands sell exclusively on Sephora and in some cases Amazon. Too Faced, Make Up For Ever, and several other independent brands are among the top brands in Sephora search, while Estée Lauder brands are practically invisible on the retailer. Budding Instagram star Anastasia Beverly Hills sells on Amazon, in contrast to LVMH which has repeatedly conveyed that its brands would never distribute their products on the e-tailer.
Furthermore, these new brands have outsized mentions on platforms that are reaching teens: vloggers. Anastasia Beverly Hills counts for 2.63% of brand mentions on Vlogger cosmetics. Several more established brands – Mac Cosmetics, Maybelline, and L’Oréal Paris – are also getting a significant portion of mentions, new names like Too Faced, Colour Pop, and Tarte are competing head-to-head and holding their own against the old guard.
However, not all new brands are created equal. L2 research finds that among those brands, acquisition targets have differentiated themselves with outsized e-tailer visibility and content. For example, recent Estée Lauder acquisition Becca Cosmetics has close to four times the follower growth of the average Beauty brand on YouTube and Instagram. And IT Cosmetics, which L’Oréal recently acquired, has 3.5 times more visibility on e-tailers (Ulta, Sephora, Amazon) than the average brand. As shown in the graph below, a phenomenal social following can make up for low search visibility and vice versa, but the brand must be outsized in at least one of those dimensions.
Based on this criteria, L2 has found some brands that are likely to be next acquisition targets. Anastasia, Tarte, and Too Faced (which was just acquired) have generated high buzz even if discoverability on search engines is relatively low. E.l.f (which went public in September) generates lower buzz on social media than its counterparts, but has more search visibility than most. However, Makeup Geek generates outsized buzz and is more visible on search than all other brands in the Index – making it a desirable acquisition.